Illegality of Marijuana
Growing Prohibits Bankruptcy
Plan Confirmation
By Robert C. Meyer
http://robertcmeyer.com/
A
lthough only four cases
have been published on this
specific issue,>1 it is clear
that proceeds from legal (legal under
state law) marijuana production cannot
be the primary source of income
for a chapter 11 or chapter 13 plan
pursuant to respective provisions of the
bankruptcy reorganization chapters.>2
And, the prohibitions by those chapters
led one court to enjoin a debtor from:
growing marijuana; using his home as
the growing house for the marijuana;
using a truck to transport marijuana;
and, buying or using fertilizer or other
horticultural devices for marijuana
production.
That court harshened
the injunction by compelling the
destruction of the existing marijuana
plants while the debtor remained
under the protection of the bankruptcy
laws.>3 This article will review how
the state law legalities for growing
marijuana are not deemed legal by
the federal bankruptcy courts; and,
because of such, marijuana growing
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CONSUMER BANKRUPTCY JOURNAL
revenues cannot be a source for
reorganization revenue in bankruptcy.
will be outlined below showing how the
courts have interpreted the same with
unanimous disapproval.
Effective Bankruptcy Clauses
The concerns being addressed
by either chapter 11 or chapter 13 are
respectively derived under § 1129(a)
(3)>4 and 11 U.S.C. §1325(a)(3)>5
which have the following identical
clause, “. . . the plan has been
proposed in good faith and not by
any means forbidden by law . . .” The
issues being addressed focus upon
the terms “bad faith” and “forbidden by
law.” Although the states may license,
authorize and permit the growing,
selling and distribution of marijuana,
federal law still prohibits the growing
of cannabis.>6 This dichotomy of the
laws (state versus federal) creates the
rub.
Numerous arguments attacked
the “good faith/not forbidden” clause
and attempted to permit confirmation
of a plan. Those various arguments
Spring 2016
What Law Is Being Violated?
It
is
undeniable
that
the
Controlled
Substances Act
(“CSA”)>7 is broad in its reading
which prohibits growth of the very
broadly defined term for marijuana:
‘Marijuana’ or ‘Marihuana’ means all
part of the plant of the genus cannabis
whether growing or not, the seeds
thereof, the resin extracted from any
part of the plant, and every compound,
manufacture, salt, derivative, mixture,
or preparation of such plant, its seeds
or resin. Including the marijuana this
time with age concentrate.
The CSA prohibits the growing
of most any product derived from
marijuana. The CSA is the violated
law. Issues arose when a wave of state
National Association of Consumer Bankruptcy Attorneys